Why it’s self defeating.
At best, it’s a delaying tactic.
[Update a while later, about an hour before my appearance on The Space Show]
Sam’s thesis is a matter of some dispute. I suspect it will be addressed in comments over there.
20 thoughts on “Shelby’s Latest Crusade”
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Sam’s got some great points, right up until he tries to come up with a clever dodge to solve the problem. Short version, that one was thought of a long time ago and the FARs prohibit it.
Slightly longer version, he misunderstands our metaphor about presenting a car dealer with a demand for cost-plus type detailed accounting for every nut and bolt in the vehicle. What would actually happen is they’d either laugh you out of the showroom, or say OK then raise the price 10X to cover the accounting cost.
The idea of spinning off your main operating company as a subcontractor then reporting the full product price from the “subcontractor” with no more detail was, it looks like, thought of and banned a long time ago. The FARs specify that any time a subcontract is for $700K or more, the subcontractor too has to provide full detailed down-to-the-rivet “Certified Cost And Pricing Data”.
It was a good thought, but it’s not going to fly. Oh well.
“Take the King’s coin, do the King’s bidding”.
Ultimately, it’s going to be very hard for SpaceX to avoid this.
If SpaceX wants to be a commercial vendor, that won’t be too hard. If SpaceX wants to be
a supported assured contractor getting a billion dollars in EELV Capability dollars, it’s
going to be on a cost accounting basis.
We’ve been through this one before. As with your equally silly opinions about energy policy and “climate change” your case is not improved by simply making shit up.
One more time, SpaceX is not angling for “EELV capability dollars”, they’re looking for EELV new-entrant certification and an opportunity to bid on DoD/NRO/USAF satellite launches. They would like to do so on a commercial fixed bid price basis. “EELV capability dollars” are a $1 billion/yr. crony-capitalist subsidy that has been given to ULA for years, supposedly to assure on-going availability to the government of their Delta and Atlas launch vehicles. What ULA has done with this money is unknown to me, but recent Russian counter-sanctions make it clear that one conspicuous thing they have not done is make any alternate supply chain arrangements anent the RD-180 engine. Thus, the government’s annual free billion has bought exactly nothing where “capability” to continue to supply the Atlas V is concerned.
SpaceX have made the fairly obvious point that, without the “capability” subsidy, ULA’s already exorbitant launch vehicle prices would be even higher and should be accounted for in judging any ULA bid made so long as ULA still receives this largesse. Now that SpaceX exists as a viable competitor to ULA, the tissue-thin rationale upon which ULA’s “free billion” subsidy is based is a dead letter anyway. The government no longer has to pay Danegeld to assure availability of EELV’s from a monopoly supplier. That being so, it should stop. ULA obviously disagrees and, even in the face of a Russian cut-off of RD-180’s, has enlisted its pet Senator, Richard Shelby, to try hobbling this looming competition by political means. Doing this effectively threatens the U.S. government’s future ability to launch critical national defense payloads when ULA’s limited stock of RD-180’s runs out. The hubris on flagrant display here is really quite stunning.
As noted elsewhere, SpaceX doubtless has internal cost accounting systems suitable to its own needs for internal information, but none of this information is relevant to the government in its role as launch services customer so long as SpaceX is quoting firm fixed prices. All the government has to decide is whether or not SpaceX provides the best deal.
Even if Shelby’s poison pill language survives conference committee deliberations on the NASA budget bill, it seems highly likely that the provision to require certified cost data for services provided to government on a non-cost-plus basis is either illegal or, at a minimum, not enforceable under current FAR rules. But establishing this would require litigation and litigation requires time. Shelby is simply being an honest politician in this case as he is obviously staying bought, but one wonders just how long he really thinks he can save off ULA’s day of reckoning with transparent sabotage efforts of this type when the firm already faces an existential threat that has nothing to do with SpaceX and over which Sen. Shelby – lacking a seat in the Russian Duma – has zero political “juice.”
Do they have comments at Space Review?
Or is it just my horrible old copy of Opera failing to show them? Hmm, fire up Internet Exploder… Well, dang. All these years I thought they had no comments there.
I disagree, Henry. Shelby is attempting to slide edgewise into FARs without unilaterally redoing the contract as a FAR contract. I.e., adding one FAR feature (full cost accounting) without the whole FAR regulations set.
Yes, if the whole contract is converted to FAR, then this trick fails. But Shelby’s trying his own sleight of hand, and into a situation SpaceX can game that way.
Shelby could go further and incorporate the totality of the FARs into the contract going forwards, but he didn’t this time.
Even adding full cost accounting by itself would likely be found to be a breach of contract by the courts, but converting a contract to FAR by force majeure will certainly be. When the government signs the contract, they’re bound by it. Undoubtedly the contracts have termination clauses; they undoubtedly DON’T have “Switch to FAR” clauses.
This applies to all future Commercial Cargo & Crew contracts; it doesn’t attempt to alter any current ones.
Since both programs are nearing new contract phases, this doesn’t buy as much time as you might hope.
Every government contract includes a “Cancellation for convenience” clause.
A lot of the commentary here on this issue seems to assume Shelby will inevitably get his way. He might, but it hardly seems to be a done deal. The NASA budget bill still has to go to conference to align the House and Senate versions. Shelby has interests and favored contractors, but so do other influential Congresscritters and some of them won’t like Shelby messing with their local heroes. Shelby’s a big dog, but he’s also a member of the current minority party in the Senate. There are other big dogs on both sides of the aisle with as many narrow and parochial reasons to oppose Shelby as he has to push his poison pill.
I still think the critical factor here is whatever Orbital decides is in its best interests. If they decide to oppose Shelby on this – and they should, purely as a matter of self-interest – they could peel off the Utah delegation from Shelby’s usual base of support; ATK is theirs now and Orrin Hatch comes along in the package. Then there’s always the nuclear option threat of walking away from the SLS solid booster deal. The wheelers will wheel and the dealers will deal. What comes out baked into this pie won’t necessarily be what went into the mixing bowl.
OSC will want to see this happen. Anything that shafts SpaceX will be in OSC’s interest.
I suspect if OSC worries about anything, it’s SpaceX getting into making their own cheap spacecraft.
OSC will want to see this happen. Anything that shafts SpaceX will be in OSC’s interest.
Typically simpleminded.
No, Orbital will not want to see this happen if it also shafts them – and it does. Shelby’s language applies to future CRS contracts as well as to future CCDev contracts. It is primarily a combined assault on SpaceX that is intended to benefit both of Shelby’s pets at once – CCDev and CRS are monkey-wrenched to the supposed benefit of both SLS, in budget terms, and ULA, in stifling of competition terms. But, as Orbital is also now intending to get EELV new-entrant certified and compete for low-end national security launches with ULA, Orbital is now in Shelby’s sights as well and probably as a secondary target, not as collateral damage. It is definitely not in Orbital’s interests to have Shelby’s poison pill survive conference committee reconciliation.
It is even possible that Orbital might be hit far worse than SpaceX by Shelby’s little ploy. I gather that the vast majority of the intended nuisance value in Shelby’s little gambit is based on prime contractors having to shake the inverted tree of their supplier/subcontractor network in order to get “certified cost” data. SpaceX famously has a much less extensive network of such suppliers and subcontractors than does Orbital and, critically, the total percentage of these firms’ contributions to the final cost of a Falcon 9 is vastly less than are the contributions of Orbital’s major suppliers to the cost of Antares. In extremis, SpaceX could probably take even more of its production in-house, if necessary, to dodge the worst effects of Shelby’s dictum.
It has been alleged by some that Orbital already has the FAR-centric accounting and reporting systems in place to handle Shelby’s requirement. I don’t know whether this is true or not. Even if it is true, there’s no reason for Orbital to have done the setup for such systems for the Antares project. That will be neither quick nor cheap to do now. The routine operation of such specialized accounting systems is also an ongoing cost that Orbital cannot be looking forward to incurring.
No, the interests of Orbital and SpaceX seem pretty solidly aligned on this issue.
I suspect if OSC worries about anything, it’s SpaceX getting into making their own cheap spacecraft.
That is always a possibility, I suppose. If SpaceX ever elects to do so, I suspect they will be formidable competitors. I knew an industrial engineer who worked – not always happily – for the Hughes satellite works before its acquisition by Boeing some years ago. Satellite production, even for models that were to be produced in fair quantity, was still pretty much an artisanal process and not organized on modern, mass-production lines. She didn’t succeed in making much progress on rationalizing matters. SpaceX, as with launchers, should they enter the unmanned spacecraft business, will be equally unbound by the fusty notions of “how we do things around here” that have long applied in legacy aerospace. Also, as with launchers, that will not be good for legacy aerospace.
Satellite production, even for models that were to be produced in fair quantity, was still pretty much an artisanal process and not organized on modern, mass-production lines.
Much like SLS production. But of course, low productivity with that program is a feature, not a bug.
Yeah. Practically a sacrament in fact. Considering that Michoud is said to be able to produce two SLS cores per year, but NASA only intends to fly missions, at best, every other year, that would seem to cap production at 25% of capacity. This vastly increases fixed costs per mission and also variable costs exclusive of materials. Then there’s the problem that the only thing SLS has available to launch is Orion and NASA only has two service modules in the pipe. Then there’s the additional problem that the SLS core stage is supposed to be powered by four SSME’s and NASA only has about 16 serviceable ones left with no expendable successors in sight. Then there’s the added additional problem that NASA has quietly cancelled both the advanced booster and J-2X-based upper stage without both of which, SLS will never get anywhere near Block II specifications and will max out its lift capacity at 93 metric tons instead of 130. It’s ironic that the Apollo missions of the 60’s should have spawned a cottage industry of conspiracy theorists accusing NASA of faking a Moon program. SLS is the real fake Moon – and Mars, and other stuff – program and it’s going on right in front of our eyes.
OSC is a govt FAR cost producer, they work entirely on DCAS, DFAR, routinely.
Yeah, I’ve heard that too. It may well be true. But it doesn’t affect Orbital’s interests with respect to Shelby’s attempted meddling. As I’ve already pointed out, there is no reason for Orbital to have set up a FAR-compliant certified cost-accountancy data capture operation for Antares – it was never a cost-plus project.
It is also far from obvious that Orbital would be delighted to have to do so now, in midstream. Even if Orbital has had the capability of arranging this FAR-compliant data capture on other contracts, the supplier base that would have to provide much of the data for Antares is probably significantly disjoint from that of previous Orbital cost-plus programs. Simply having the relevant software doesn’t make actually using it either easy or cheap. I was involved in several accounting software system development projects during my salad years. Setting up the databases to initial conditions and arranging for routine data entry thereafter is a huge part of the total project expense.
To cite perhaps the most relevant particular, I doubt very much that Yuzhnoye in Ukraine has any prior experience with FAR-compliant accounting. At least until Orbital gets Antares’s first stage re-engineered on some basis other than Yuzhnoye’s structures and Brezhnev-surplus engines, the Ukrainians provide a very large piece of the total value of each Antares vehicle. How much incentive will they have to suddenly and expensively begin providing mounds of cost numbers to crazy Americans who will, most probably, be terminating their supplier relationship not too much further down the line?
Contrast this with SpaceX’s situation. Collecting FAR-compliant cost data should be much less onerous as most of their value-add is the result of in-house operations. Converting this existing data to FAR-compliant formats, etc. would not be cost-free, but it might not be as ruinous as Shelby evidently hopes it will be. It would be a pain in the ass to gin up a FAR-compliant reporting system on top of whatever they’re already using to track things internally, but SpaceX’s “tail” of suppliers and contractors is much less consequential with respect to Falcon 9 and Dragon than Orbital’s is with respect to Antares. Orbital buys major subsystems from its suppliers. SpaceX buys mostly the equivalent of nuts and bolts – vital, but not a big slice of the total F9 out-the-door price. Most – perhaps even all – of the outfits that supply such small, commodity components to SpaceX also do so to legacy aerospace companies, hence collecting required cost data might not present too much of a problem.
So – yet again – Shelby’s little language bomb is not necessarily, or even probably, an early Xmas present for Orbital vis-a-vis SpaceX. Orbital may well stand to be hurt more by it than SpaceX. Given Orbital’s recent designs on a piece of ULA’s current monopoly rice bowl there are just all kinds of reasons for Orbital to regard Shelby as an enemy and to throw in with SpaceX in attempting to scupper this effort at political sabotage.
Follow the damned money.
Reply to Dick Eagleson/June 10, 2014 at 1:45 pm
One factor to consider for SpaceX is the effect on their proprietary IP of “cost-plus” accounting. Some significant parts of their internal low-cost processes they are apparently keeping confidential under the current NASA reporting regime – Scott Pace says as much in his March Defense Appropriations Subcommittee testimony, calling certain parts of their internal processes essentially “magic” as far as he could learn at his earlier NASA job.
This is a legitimate thing for a commercial outfit to do, and very much part of the silicon-valley cultural origins of a number of “newspace” companies.
But it drives the government customers used to total open-kimono cost-plus contractors crazy. I can personally testify to that. They may not have paid for that level of access – it’s part of the cost savings – but they want it anyway.
This could be at least part of the current push for cost-plus accounting – a desire to force SpaceX to either share their proprietary IP or go away.
As much as I dislike the Social Justice Warrior Outrage Machine(TM), I think finally there’s going to be an actual practical use for it in this case. Being an old time Southern Democrat turned GOPe, Shelby is a prime target for a trumped up charge of “racism”, and “misogyny”.
Interesting angle. In that connection it may be worth pointing out that SpaceX, Shelby’s apparent primary target for this bit of attempted mischief, just happens to be one of, if not perhaps the, biggest employer in the Congressional district of the Hon. Maxine Waters, one of the leading lights of the Congressional Black Caucus. A white Alabama senator doing favors for home-state industry by trying to up-end the rice bowl of a major employer in a black Congresswoman’s district? Bring on Al and Jesse! Pop some corn and pull up a chair!
Yes, an interesting angle indeed.
Given that I actually know people in her district office, I may misbehave.
I think it’s time to resurrect my Arstechnica account and put out the Xopher’s suggestion of sending the SJW’s after Soviet Shelby on Ars. Plenty of SJW types infest its comment sections.
Oh, God, please do!